S.C. Nestel, Inc. v. Future Const., Inc.

• Citation: 836 N.E.2d 445
• Decision Date: 31 October 2005
• Docket Number: No. 49A05-0411-CV-633.,49A05-0411-CV-633.
• Parties: S.C. NESTEL, INC., d/b/a Advantage Design Build, Appellant-Defendant, v. FUTURE CONSTRUCTION, INC., Appellee-Plaintiff.
• Court: Supreme Court of Indiana

836 N.E.2d 445

S.C. NESTEL, INC., d/b/a Advantage Design Build, Appellant-Defendant, v. FUTURE CONSTRUCTION, INC., Appellee-Plaintiff.

No. 49A05-0411-CV-633.

Court of Appeals of Indiana.

October 31, 2005.

John A. Hovanec, Anthony M. Campo & Associates, Indianapolis, for Appellant.

James S. Kowalik, Christopher E. Baker, Hostetler & Kowalik, P.C., Indianapolis, for Appellee.

OPINION

BAKER, Judge.

Appellant-defendant S.C. Nestel, Inc. d/b/a Advantage Design Build (Nestel) appeals the trial court's judgment in favor of appellee-plaintiff Future Construction, Inc. (Future) regarding Future's claims for negligence and breach of contract. Specifically, Nestel contends that the trial court erred in denying its motion for summary judgment and in failing to enforce the contractual waiver of subrogation clause in its judgment. Finding that the waiver of subrogation clause is controlling, we reverse the judgment of the trial court.

FACTS

The parties stipulated to the following relevant facts. Future, a general contractor, contracted with the Metropolitan School District of Perry Township (MSD Perry Township) on August 23, 1999, to construct a post frame warehouse in Indianapolis. On September 28, 1999, Future contracted with Nestel as a subcontractor to build the warehouse. The subcontract incorporated the MSD Perry Township/Future contract by reference. On November 30, 1999, Nestel contracted with Coffey Construction, Inc. (Coffey) as a sub-subcontractor to construct the warehouse. Future was not a party to the contract between Nestel and Coffey, nor did Future have a contract with Coffey. On February 24, 2000, the warehouse collapsed while Coffey was building it. MSD Perry Township paid Nestel $17,214 for demolition and removal of debris, and Future reimbursed MSD Perry Township through Cincinnati Insurance, the builder's risk insurance provider for Future. In May 2000, Future issued Change Order # 2 to the subcontract in the amount of $106,350 for rebuilding the warehouse to its pre-collapse condition. The total claim paid by Cincinnati Insurance was $143,164.70.

The contracts at issue are standard form American Institute of Architects (AIA) contracts. The general conditions are those contained in AIA document A401, 1978 edition. Article 11 of the general conditions sets out the requirements for who is to provide what type of insurance. Article 11.1 provides that the contractor would provide liability insurance and Worker's Compensation insurance for claims arising out of the construction. Paragraph 11.1.2 forbids Nestel from assigning or subcontracting its subcontract without the written consent of Future and from subcontracting portions of the subcontract without the written consent of Future "when such notification is requested by the Contractor." Appellant's App. p. 277. Paragraph 11.2.1 provides that the owner is responsible for purchasing the owner's usual liability insurance. Paragraph 11.3.1 provides:

Unless otherwise provided, [MSD Perry Township] shall purchase and maintain, in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located, property insurance in the amount of the initial Contract Sum as well as subsequent modifications thereto for the entire Work at the site on a replacement cost basis without voluntary deductibles. Such property insurance shall be maintained, unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance, until final payment has been made as provided in Paragraph 9.10 or until no person or entity other than [MSD Perry Township] has an insurable interest in the property required by this Paragraph 11.3 to be covered, whichever is earlier. This insurance shall include interests of [MSD Perry Township], [Future], Subcontractors and Sub-subcontractors in the Work.

Appellant's App. p. 316. Paragraph 11.3.1.1 states:

Property insurance shall be on an all-risk policy form and shall insure against the perils of fire and extended coverage and physical loss or damage including, without duplication of coverage, theft, vandalism, malicious mischief collapse, false-work, temporary buildings and debris removal including demolition occasioned by enforcement of any applicable legal requirement, and shall cover reasonable compensation for Architect's services and expenses required as a result of such insured loss. Coverage for other perils shall not be required until otherwise provided in the Contract Document.

Id. (emphasis added).

The MSD Perry Township/Future contract, which was incorporated into the Nestel/Future contract, provided for waivers of subrogation in Paragraph 11.3.7:

[MSD Perry Township] and [Future] waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) the Architect, Architect's consultants, separate contractors described in Article 6, if any, and any of their subcontractors, sub-subcontractors, agents and employees, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work, except such other rights as they have to proceeds of such insurance held by [MSD Perry Township] as fiduciary. [MSD Perry Township] or [Future], as appropriate, shall require of the Architect, Architect's consultants, separate contractors described in Article 6, if any, and the subcontractors, sub-subcontractors, agent and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein. The policies shall provide such waivers of subrogation by endorsement or otherwise. A waiver of subrogation shall be effective as to a person or entity even though they person or entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.

Appellant's App. p. 317.

The Nestel/Future subcontract contained the following relevant provisions:

9.1 Prior to starting work, [Nestel] shall obtain the required insurance from a responsible insurer, and shall furnish satisfactory evidence to [Future] that [Nestel] has complied with the requirements of this Article 9. Similarly, [Future] shall furnish to [Nestel] satisfactory evidence of insurance required of [Future] by the Contract Documents.

9.2 [Future] and Subcontractor waive all rights against each other and against [MSD Perry Township], and Architect, separate contractors and all other subcontractors for damages caused by fire or other perils to the extent covered by property insurance provided under the General Conditions, except such rights as they may have to proceeds of such insurance.

Appellant's App. p. 276.

On December 26, 2001, Cincinnati Insurance, by and through Future, filed a complaint alleging that Nestel and Coffey were negligent and responsible for the collapse and damage to the warehouse and that they breached their contracts by not covering the loss of the damages by way of Nestel's insurance coverage. Essentially, the action was brought as a subrogation claim with Cincinnati Insurance asserting that it is subrogated to the rights of Future.

On December 6, 2002, Nestel moved for summary judgment on the issue of the enforceability of the waiver of subrogation clause, arguing that the intent of the parties "was to allocate the risk of damage to the building during construction by the provision of property or builders risk insurance by either the owner or the general contractor." Appellant's App. p. 140. Coffey was not a party to the motion. The trial court denied Nestel's summary judgment motion and denied Nestel's request to certify the issue for interlocutory appeal.¹

The trial was held on August 10, 2004. On October 29, 2004, the trial court entered its findings of fact, conclusions of law, and judgment in favor of Future, awarding $143,164.70 plus costs and interest. The trial court found that the waiver of subrogation clause had been "superseded by Nestel's breach of its contract with Future by subcontracting work to Coffey without notice to Future and by the negligent acts of Nestel and Coffey which led to the collapse of the Warehouse." Appellant's App. p. 259-60. Nestel now appeals.

DISCUSSION AND DECISION

Nestel contends that the trial court erred in failing to enforce the subrogation clause at both the summary judgment and the judgment phases. Specifically, Nestel argues that precedent in similar cases has found waiver of subrogation clauses to be valid and enforceable even if there has been a breach of contract or negligence by a subcontractor.

I. Standard of Review

Upon reviewing the grant or denial of summary judgment, we use the same standard of review as the trial court. Summary judgment is appropriate only where the evidence shows that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Poznanski v. Horvath, 788 N.E.2d 1255, 1258 (Ind.2003). We will construe all facts and reasonable inferences in favor of the non-moving party. Troxel v. Troxel, 737 N.E.2d 745, 748 (Ind.2000). The review of a summary judgment motion is limited to those materials designated to the trial court. Id.

On the other hand, where the trial court enters specific findings of fact and conclusions of law with respect to a final judgment, we apply a two-tiered standard of review; first we address whether the evidence supports the findings, and then whether the findings support the judgment. Learman v. Auto Owners Ins. Co., 769 N.E.2d 1171, 1174 (Ind.Ct.App.2002), trans. denied. The trial court's findings and conclusions will be set aside only if they are clearly erroneous — when the record...